Accounting for bad math in tax policy: How being off by 10x gives us bad tax policy
Influential academic research prior to the 2017 Tax Cuts and Jobs Act estimated that U.S. multinationals earned 50-60% of foreign profits in tax havens, costing the government $100 billion annually in lost revenue. But after correcting for double counting and misattribution errors in how foreign profits were measured, this estimate dropped to just $10 billion. This analysis examines how fundamental accounting errors led to a tenfold overestimate and why policymakers must carefully scrutinize the methodologies behind international tax revenue projections, including current OECD proposals.